It looks like a growing number of professional investors are preparing for a stock market crash, as hedge fund filings for the second quarter show a spike in defensive positions.

In particular, legendary billionaire George Soros made a huge bet against the market. He increased his short position on the Standard & Poor’s 500 by a startling 605%.

The 9.69 million new shares of SPDR S&P 500 ETF Trust (NYSE Arca: SPY) put options gave Soros a total of 11.29 million shares and made it the biggest holding in his portfolio.

Soros also added significantly to several gold positions, a “safe haven” move that’s typically made when investors suspect a stock market crash is on the horizon.

And Soros wasn’t the only hedge fund manager making defensive moves.

Several, such as Carl Icahn, increased their holdings in energy stocks, and in particular energy stocks that pay a healthy dividend. That’s also a type of hedge against a stock market crash.

Others have been snapping up 10-year Treasurys and buying more put options than usual.

“You definitely are seeing managers reduce risk levels,” Robert Duggan, a managing director at Skybridge Capital, told The Wall Street Journal. “‘Cautious’ or ‘more defensive’ are clearly things you hear when you speak with managers.”

And yet these hedge fund managers don’t seem to be bailing on stocks altogether. Some even increased their long positions.

Soros, for instance – despite buying all those SPY put options – made big additions to several of his long tech positions, including approximately 1.2 million shares of Apple Inc. (Nasdaq: AAPL), 1.79 million shares of Facebook Inc. (Nasdaq: FB), 2.4 million shares of Intel Corp. (Nasdaq: INTC), and 1.8 million shares of Microsoft Corp. (Nasdaq: MSFT).

That certainly doesn’t look like a hedge fund manager planning for a stock market crash – but if you dig a little deeper it becomes clear exactly what Soros and his fellow hedge fund managers are up to – and it makes perfect sense.

These Moves Show How to Survive a Stock Market Crash

The apparent contradiction really isn’t that much of a contradiction – it’s Hedge Fund Investing 101. And right now it’s the kind of smart move all investors need to be watching.

This is about preparing for a short-term pullback while maintaining a long-term strategy.

Hedge fund managers sense a stock market correction may be near (we’ll get to that in a second), but recognize that the market is in the midst of a long-term push to higher levels.

“This is just the first leg of a generational bull market,” said Money Morning Capital Wave Strategist Shah Gilani – a former hedge fund manager himself.

A generational market, Gilani explained, is a long-term market cycle that has averaged about 25 years in duration over the past 112 years.

But generational bull markets are subject to corrections, temporary bear markets, and even stock market crashes along the way.

Hedge fund managers are preparing for a stock market downturn in the middle of this generational bull market because of the increased likelihood of a black swan - an unpredictable event that can shock the markets.

Many of these black swans lurk in the Middle East, from the Syrian civil war to instability in Iraq and Egypt to the unpredictability of the Iranian regime.

But Europe also has its share of market-threatening problems as it tries to cope with the hangover from the Eurozone debt crisis.

And then there’s China. Some economists believe China’s banking system is on the verge of a major crisis, which would surely rock world markets. And in addition to saber-rattling in the South China Seas, China has also been increasingly belligerent toward foreign-based businesses such as Microsoft, Chrysler, and AstraZeneca Plc. (NYSE ADR: AZN),

Buying S&P 500 put options right now is a cheap and easy way for hedge fund managers like Soros to protect themselves against the possibility one of these black swans will trigger a stock market crash – and to make a quick profit should anything actually happen.

You see, put options are cheaper when volatility is low, as has been the case for months.

“[Soros] is just taking advantage of a low-cost insurance environment,” Brian Wesbury, chief economist at First Trust Advisors, said last month on FOX Business’ ”Opening Bell” program.

Prepare for a Stock Market Crash Like George Soros

While it’s impossible to know if a black swan event will cause a stock market crash in the next few months, buying a little insurance, George Soros-style, is a sound strategy.

Retail investors could follow Soros’ lead and buy S&P put options.

Or they could buy some shares of “inverse funds” that rise when everything else falls. That would include, for example, The Rydex Series Trust Inverse S&P 500 Strategy Fund (MUTF: RYURX) and the ProShares Short QQQ ETF (NYSE Arca: PSQ).

Apart from that, investors should prepare for a black swan downturn by tightening up their trailing stops and making sure they have a list of stocks they’d like to own ready to go. Such stocks will get much cheaper after a stock market crash, and that’s the best time to buy them.

But one reaction investors absolutely must avoid in the event of any stock market crash is to run for the exits and never come back.
“I’m a strong believer that you have to be in it to win it,” Gilani said. “You need to stay in because after that crash there’s nowhere to go but up.”

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves."
William Pitt, British Prime-Minister (1759-1806)

Marc Faber has long predicted that a collapse in U.S. stocks is coming. On Thursday he reiterated that call, saying there is fresh evidence that a bear market is ahead—courtesy of the Golden Arches.

On Tuesday, McDonald's reported that global same-store sales in August fell 3.7 percent in August, well short of expectations. The worst drop occurred in the Asia-Pacific region on the back of a Chinese meat safety scandal, but even U.S. sales slid 2.8 percent.

For Faber, those results are a perfect example of the damage being done by central banks—and the harbinger of more bad news to come.

"Nobody knows for sure" what will cause stocks to collapse, but "the earnings may disappoint. We had, essentially, very poor sales from McDonald's. Now, McDonald's is a very good indicator of the global economy. If McDonald's doesn't increase its sales, it tells you that the monetary policies have largely failed in the sense that prices are going up more than disposable income, and so people have less purchasing power."

Faber has long argued that the policies of the Federal Reserve and other central banks simply increase asset prices and create inflation rather than actually stimulating the economy. But while the long-predicted inflation has not come to pass, Faber says that the McDonald's results reflect the fact that inflation is rising faster than income, reducing the amount that individuals can spend.

"So well-to-do-people have done very well. High-end restaurants are packed. Now, some money flows to people who are serving there, because well-to-do people give generous tips, but ordinary people have a much higher cost of living increase than 2 percent."

But even as most have seen their cost of living increase, according to Faber, median family income has hardly budged. That puts less-wealthy families—and the companies like McDonald's that are reliant upon them—in a tough bind.

So if Faber's analysis is correct, how bad could it ultimately get for stocks?

"We've had a bull run since October 2011 without more than an 11 percent correction," he notes. "And now we're probably not going to get a correction, but more likely, a bear market that will be 20 to 30 percent at some point."

After all, Faber said that fewer and fewer stocks are making new highs, and a greater number are making 12-week lows, "so the technical picture of the market is not very good."

Add that to Faber's observation that "the U.S. is the most pricey market compared to other markets in the world," and he has constructed a bearish case.

—By CNBC's Alex Rosenberg

"Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves."
William Pitt, British Prime-Minister (1759-1806)

Did this thread lose everyone's interest? I'm curious to know of updated thoughts from those who have been active participants in this thread, especially with the recent market volatility.

It seems like there have been wildly differing opinions, but that is what actually makes a market - correct?

An interesting experiment would be to allow each of you/us 10 shares (or 100 or 1000 shares) of a hypothetically trad-able security like the SPY (S&P ETF) and trade it amongst each other. Or not trade it. That way, we can easily see who puts their (hypothetical) money where their opinion is.

The prices of those precious metals is well off their highs. How might you accumulate the physical metal?

My ex-wife hoarded a small amount (some coins) in the late 80's. It seems to be worth around 4-5 x what she paid for it - maybe not quite 5. I think she was accumulating it at around $4. I remember commissions being ridiculous.

There were some interesting posts earlier in this thread. I take a more ambivalent view. That's not to say that my view is careless, though - it's just not "all-or-nothing."

So far, one (Tony) has "dumped" the market ETF (a proxy) and exchanged it for silver somehow. Today, it was up 1.1% and closed at $196.52. I know that isn't unusual.

For me, I'd have to say I still "own" the ETF and am waiting for clearer evidence that it should or should not be held on to.

I don't absolutely reject the notion of a calamity or crisis but I see few better opportunities than owning securities - other than owning a business - for someone who is trying to accumulate wealth. And then, a business (without leverage) would have to return 10-15%+ growth to outperform. With leverage, a business might do 4 or 5+ times better but not without its own form of risk...

You buy stamped bullion bars or rounds that are at least 99.9% fine (bullion grade).
Steer clear of coins or jewelry, they are just overpriced works of art.
You don't want to pay more than the melt value, and you want pure solid silver (or pure solid 24Kt gold).
The good stuff has all been assayed and stamped.
Silver is now so cheap its just not worth counterfeiting.
Older battered bent and oxidized bars look horrible but are just as valuable and probably more likely genuine.
When silver is $500+ an ounce, there will be a lot of fake bars out there, but not now.

Check out bullion dealers and pawn shops and pay cash money.
Definitely DO NOT pay by cheque or credit card.
Small purchases go unnoticed nobody will remember the sale.
Hand over your cash and put the goodies in your pocket and walk away.
The dealer gets his money and has no clue who you are, and does not really care....

Tell nobody you have it.
Hide it in the filthiest most difficult place to access.
Use multiple hiding places.
Use your imagination.

Realize that bullion dealers are just dealers, and they make a small margin on every transaction.
They are not speculaors, there is a very big difference.

They will happily sell when the price is low, and buy when the price is high.
They make their margin on every transaction and never turn away a customer.
You will never have any trouble buying or selling no matter what the price does.

Its just like perishable goods shuch as fish or fruit.
If apples cost ten dollars each, or a dollar a whole box, the "shop" just buy in bulk and sell to the customer and make their margin.
The price of fish or fresh fruit goes up and down daily and seasonally, but the shop owner does not care.
Bullion dealrs work exactly the same way.
They will always be happy to see you come through their door, and could not care less who you are.

Thanks for the prompt, thorough reply. Hope it also helps others. I need to admit, at least, that I was aware of those sources and means to acquire precious metals. I'm not lazy, but it seems a lot of effort doing so and much more like being an actual 1849er. Heaven forbid I go senile and forget where I put my stash, though.

Any seller is aiming to offer the sky and yet bid the earth. That is their spread and where they make their profit. I get that. Any buyer seeks the opposite. It is supply and demand - same as with any product or good. You get what you pay for and you pay for what you get.

How it affects me personally is in my cost-basis; the cost to acquire it, take delivery of it, the cost to maintain it plus the cost to deliver it to a market. What do I own it for, now, and what can I redeem it for later?

Another consideration is this: "What does that asset produce?"

I was leading into a question based on your previous remark that the physical metal is nearly depleted (my words). While I have no way of knowing that with hard facts, I can surely see how it could be likely. It's plausible. I'd be interested in that information.

Are there any credible and verifiable sites or contacts that make that argument... solidly?

Until then, I feel compelled to abide in the current financial system. With caution, always.

"Stock Market Crash" will always be an attention-getter. I hope others think about this subject a bit more, yet most ignore/avoid it. These topics usually only surface when the market has already "crashed" but I think anyone can be more informed along the way.

I'm glad I found this thread. I hadn't logged on in ages. Props to the OP.

Gold was once the metal of Kings, the most precious, beautiful, and valuable metal on Earth.
That is no longer true, the platinum group of metals now far exceed the price of gold.
The simple reason being that metals such as rhodium have very unique commercial and scientific properties.
They are very rare in nature, so supply and demand kicks in and the platinum group of metals now far exceed gold in value.

There is another factor.
Gold is simply hoarded as a store of value, has been for thousands of years, very little gold is actually consumed.
There are tens of thousands of tons of gold in vaults hidden all over the world, there is no real shortage of gold, nor will there ever be.

Silver is different again.
For thousands of years silver like gold was hoarded and used for everyday items, belt and shoe buckles, buttons, plates, spoons, jewelry, coined money just to name a few well known historic uses.
Silver was never thrown away or consumed, it was always recycled.
So for thousands of years silver like gold became very common, and the silver stock pile around the world grew along with world population. In nature silver is roughly fifteen times as common as gold, and the long term historic monetary value of both reflects that ratio.

That all suddenly changed in the twenteith century.
Plastic and stainless steel largley replaced solid silver for most everyday household items. Far cheaper, more durable, and more practical.
But silver also started to be used for industrial purposes such as for mirrors and photographic film, as well as uses in the electrical and electronics industries that simply did not exist in the previous century.

All that modern silver is now consumed and ultimately used as land fill and never recovered.
Silver usage has risen exponentially and is still rising at an ever quickening rate.
Silver consumption passed silver production a very long time ago.
The vast silver consumption is being sourced from old inventory accumulated over centuries, some of the silver around today must be many hundreds of years old, remelted countless times. And its all being consumed (and destroyed) by industry at an ever increasing rate.

What is about to happen is the world silver supply is about to run out, demand far exceeds world mine production and still increasing.

Its simply not possible to ramp up mine production, because there are very few pure silver mines still in operation.
Pure silver mines are extremely rare.
Most siver (in nature) is combined with copper, lead, and zinc, with the silver being in very small quantities, and silver becomes a waste byproduct of refining the major metal, believe it or not.

If you are mining copper that has a 2% to 5% silver content, you make most of your money on the copper.
Its simply not practical or economic to increase siver production by (say) ten or twenty times, however much you might wish to do so.
You would need to mine and process ten or twenty times as much copper as well, which is just not an economic proposition.

We are fast aproaching the situation where bulk silver wharehouse stocks around the world are about to totally run out.
The Chinese are going nuts buying up silver right now. They know....

Companies that for example make batteries, that sell for five dollars each might have two cents worth of silver content.
Without silver they are out of business.
If silver goes up (say) twenty times in value, that battery now has forty cents worth of silver in it and sells for five dollars forty. Not too painful for either the manufacturer or the battery consumer.
The battery producer will happily pay multiples more for silver to stay in business, all his competitors will face the same problem.

But.... He may still not be able to source silver at any price because it is just no longer available in sufficient quantity.
Somebody HAS to miss out.
Silver consumption is now vastly more than mine production, which cannot be increased, so the scramble for silver supply is going to become truly vicious !

It is entirely possible that silver could become more valuable than gold, just because of its unique properties and scarcity.
That has already happend to the platinum group of metals.
A hundred and fifty years ago, nobody would have believed any other metal could ever be worth more than gold.

Silver has the highest thermal conductivity of any other metal.
When polished it reflects light like nothing else.
It has the highest electrical conductivity of any metal.
Colloidal silver has medical applications, especially now that antibiotics no longer work as they once did.
There are many many applications for silver in unique chemical reactions where nothing else can replace it.

Do your research, there is plenty about silver on the internet.
It is a fascinating subject.

The whole world financial system is about to collapse through debt, over leveraging, and derivatives.

Silver is about the best possible long term investment right now if you take a very long term view.
Everything is in its favor.
But you may lose money short term. Just sit tight if you do.
I have watched silver go from seven dollars to thirty eight dollars and back to seventeen dollars. And I am happy to wait for the inevitable price explosion.

The crooked bankers and governments are rigging the gold and silver markets to support the dollar, but not for much longer.

Silver will break free of the rigging and the corruption.
Market forces cannot be contained by crooks forever.
Soon the price will reflect true value and availability, and its going to be a real shock and awe event when it happens.

You absolutely must be prepared and have the physical silver in your actual possession.
No good having a piece of paper promising to return YOUR stored silver one day.